Manhattan Is No Longer the Top Spot for CRE Liquidity
Manhattan fell from its perch as one of the top two markets for liquid commercial property and was replaced by two Europe-based cities. However, the global market is collectively reeling from COVID-19's impact.
COVID-19 has walloped the global commercial real estate market and it has displaced Manhattan as one of the top markets for liquid commercial properties, according to analysis by the Real Capital Analytics.
For the first time since 2011, Manhattan dropped out of the top two to No. 3 in ranking the top global markets for liquid commercial properties. Instead, central Paris and Berlin were the world’s most liquid commercial property markets at midyear, Real Capital Analytics reported.
While Manhattan’s drop was somewhat unprecedented, it shouldn’t be unexpected. For months after COVID-19 hit the United States, commercial real estate observers have warned of its debilitating impact on the Manhattan commercial real estate market.
To be sure, Q1 2020 Manhattan leases were strong in January and February with a drop in availability and a rise in rents. However, when COVID-19 and March arrived, leasing activities paused, GlobeSt reported. By early April, reports already began to swirl that some Manhattan-based retail tenants were not paying rent after statewide lockdowns went into place. In August, leasing activity in Manhattan was up as prices fell, but the road to recovery was still shaky.
This week, real estate brokerage company Colliers International reported year-over-year leasing activity was on pace for the lowest full-year leasing volume in this century. But Manhattan isn’t the only area experiencing declined commercial growth.
Globally, market liquidity fell in 111 of 155 commercial real estate markets in Q2, according to Real Capital Analytics. The number of markets posting lower quarter-on-quarter levels of liquidity mirrors the Great Recession of 2009. However, the “liquidity crunched” was more prevalent in the Americas, Real Capital Analytics wrote.
Amid COVID-19 lockdowns and economic disruption, 58 of 64 markets in the Americas registered a lower liquidity score from Q1 to Q2 of 2020. While Europe, the Middle East and Africa (EMEA) liquidity scores fell in 37 of 63 markets and 16 of 28 markets in the Asia Pacific.